Monday, December 28, 2015

As 2015 comes to a close it's probably a good time to review things and ask where we stand in terms of major monetary system change that might be coming. That is what this blog was created to watch for and we have had many sign posts along the way that at times seemed to indicate we may be on the verge of some major changes.

But as time has marched on things are still about the same as they have been and no major monetary system change has happened yet. Below let's review some events that we have covered and then see where things might be headed in the future.

(Note: I will leave this article up at the top of the blog the rest of this year and be back after the New Year with new articles)

The 2008 Financial Crisis - This is probably the biggest event that has happened recently that seemed to be pointing towards potential major changes. The whole financial system was shaken pretty soundly and some reports said the US got very close to a complete shut down of the banking system. The response was to try and stave off the crisis with massive stimulus programs. Both the US government (remember TARP) and the US Fed geared things up beyond historic levels to try and keep the system afloat. Whether this has been successful is still a hot debate today. Some will say that the actions taken by the US managed to stabilize the system well enough that we avoided a collapse and now we have had several years of relative stability. Critics dismiss this and say only ongoing money creation and interest rate suppression programs are keeping the system afloat. They see a still unstable system where at any time things could go south in a hurry. I don't claim to know the truth. What I try to do here is find good relevant information sources and report as best I can a range of credible views. I try to stick with those who support their view with facts and sound logic as best I can determine. I will just continue on that path. Personally, I view the system as reasonably stable for now, but also believe that the conditions that could lead to another major crisis are still out there. This has been stated in many public warnings by both the IMF and the BIS (Bank for International Settlements) which we have documented here for readers (a page viewed by tens of thousand of readers from all over the world I will add).Ongoing Issues at the IMF (2010 reforms and SDR Currency Basket) - These are topics I feel have been covered here on the blog as well as any publication out there. We have followed every twist and turn in the effort to get the 2010 IMF reform package passed. Congress finally quietly approved the reforms in the recent spending bill. We were early last year to define the decision about whether or not to add the yuan to the SDR currency basket as being important to potential monetary system change. Now that these two things have happened, we won't see major changes right now. But these moves do lay the groundwork for bigger changes to take place. The biggest question is what the pace of the change will be. Quickly in response to another crisis or more gradually over many years in small increments? Time will tell. One thing for sure is that whatever major changes do come to the global monetary system are most likely going to originate at the IMF, The World Bank and at the BIS. We will continue to monitor all those institutions for that reason. The BRICS are important as well and we will continue to follow their activities.What happened to "the great reset?" - This is a reasonable question to ask. When this blog started, the media (both mainstream and alternative) was buzzing with speculation that a major reset of the global monetary system was about to take place. It's a big reason we created the blog. We wanted to provide a service to the public in case a major change impacting their daily lives did happen. So far, no reset has happened and most of the talk about one has died down. Does that mean we will not have one? I don't know. I have learned that trying to predict the future (let alone the timing of a future event) is pretty much a futile endeavor. What we do know is that the conditions that could lead to such an event still exist. My sources indicate that within the system there is a general feeling that the system has been stabilized well enough to avoid a sudden major change event. However, none of us can possibly foresee what will happen in the future. All it takes is one major unexpected event to quickly change things. I'll use this example even though the odds of this happening are very low. Suppose a major solar flare erupted and it was powerful enough to disrupt the global satellites and electric infrastructure grid on earth. The one that the present financial system relies on today. Clearly no one could foresee something like that coming. It could even happen if geo-political conflict heated up and a major power used the weapons available today (electromagnetic pulse) that can disrupt communications and grid systems. Is that likely? Probably not, but you tell me if you think it's impossible for our grid to be disrupted. There are many other events that could lead to a major financial system upset, so assuming it can't happen is both naive and foolish in my opinion. As one example, major powers are constantly accusing each other of cyber attacks. Jim Rickards and other credible analysts believe their models suggest that such an event (an unexpected event leading to crisis) absolutely will happen with only the timing as the unknown. Could things just slog along without much major change? - Yes they could. So far that is exactly what has happened. If that is what happens then I believe we will see the kinds of changes we have written about here take place over many years and perhaps even decades. Some day we might see the SDR used at the IMF replace the US dollar as the leading global reserve currency. We might see the IMF rules changed so that the SDR could become a "real SDR" as proposed by Dr. Warren Coats which we have covered here. We could even see a digital version of this global currency that everyone could own and use for transactions alongside their national currency. Will we? I don't know. What I do know is that the technology to do all this already exists and is available. Whether the powers that be will choose that path or how the world would accept it are unknown to me. But we have covered it all here and readers here should not be surprised at whatever might develop in the future on this topic.What Should We Do to Prepare for an Uncertain Future? - This is actually an easier question to deal with. There are common sense things we can do including:-Stay informed so that if events leading to major change appear you can recognize them and not be taken by surprise or shocked- Make some common sense preparations to be prepared in case the financial system were to be disrupted for ANY reason. There are many reasons why it could be, even though it may not happen any time soon. Look at it like you would your home or car. You take some common sense precautions to insure those in case of an unexpected event. You hope you don't need the insurance, but you are glad you have some and sleep better because you do. -Don't let anyone use fear tactics on you. While there are legitimate reasons to be concerned about financial system stability, living in constant fear of it is no solution. Also, fear can be used to get people to make poor decisions regarding their personal financial situation. Don't ever make a major financial decision based on fear. Make it on facts using sound logic.-Develop a network of family and friends you can rely to pitch in and help if an emergency ever does arise in your life. This might be your best friends, your co-workers, your church, etc. One heartwarming thing I see over and over while doing research for this blog is how most people will pitch in to try and help in a crisis. Never forget that there is a huge resource of people who mostly want to try and help out if they can. It's a hidden asset around us that often gets overlooked.-for those who want to delve into this topic further, Jim Sinclair has put together this check list of ideas to be prepared for an emergency situation should you encounter one. This is one of the best articles I have seen from Jim on this topic because it offers practical ideas for the average person. An emergency can arise unexpectedly at any time as we just learned here in the Dallas area.I hope all readers have had a great 2015 and can look forward to a great 2016. I don't know what the future will bring, but I will continue to try and provide good information to help with staying informed as best I can. There are some readers here who really help me out in that regard even though they prefer to stay out of the public eye. Jim Rickards and others try their best to help and will answer any questions I have for them even though that takes valuable time to do. I appreciate the help I get from all these sources.

Sunday, December 27, 2015

Those of us who live in Texas know that we are at risk for tornadoes, just not usually in December. Yesterday we were visited by a rare December tornado (arrived the day after Christmas). We feel very fortunate because no one we know was injured. The EF4 (200+ mph winds) cut a path across Lake Ray Hubbard less than 3 miles from where we live, but we suffered no damage. Others were less fortunate as the Dallas Morning News describes. Our hearts go out to the victims and their families.

Below are some photos of the tornado that were caputured and links to videos. You can see how huge this wedge tornado was and how it stayed down for several minutes in the videos.

The tornado crossed an Interstate highway and tossed at least a dozen cars into the air. This is where most lives were lost. Today we drove down the local highway near where we live to see what the damage looked like. The tornado was very wide and destroyed buildings and homes in a path over a half mile wide in places. Last report I saw was that several hundred homes in Rowlett, Texas were seriousy damaged. Here is a link for anyone who might want to help out the victims through the Red Cross. Also, a local church has basic supplies available for victims. They can be contacted at 971-771-9161.Added note: Disasters like this are always horrible, but also can be inspiring too. In this case there were some heroes who worked to help save some of the people who were hit by the tornado on the Interstate. First responders from all over the area jumped in and volunteered to help out immediately. Within 24 hours they were already making good progress towards restoring normal activity were power was lost, clearing debris, etc. Finally, the local news reported that there were very few reports of looting in the hard hit areas of Garland and Rowlett. Most people want to help in a crisis. The city of Garland was so overwhelmed with people trying to provide supplies for those in need, they had to thank them and tell them they did not need any more.

"After the perilous weather passed, residents and rescue crews worked frantically — while nearly an inch and a half of chilly rain fell — struggling to help those who hadn’t escaped harm.

“I am so proud of our first responders, including the regular citizens who have helped their neighbors,” Dallas County Judge Clay Jenkins said Sunday."

Jim does so many TV interviews that I try to just make one blog post per month with links to his most recent ones. In addition he does a free monthly webinar where he fields questions on a variety of topics. Below are links with a brief summary for each link just below.

*The Fed has raised the interest rate by .25%, and it may go down in history as one of the Fed’s greatest blunders

*The Fed always follows the economy, it never leads it
*Janet Yellen’s models include the Philips Curve which has been thoroughly discredited, does not work and has no empirical support
*Labor force participation is at a 40 yr low
*If you lose one $85,000 job in the oil patch in North Dakota and gain three $25,000 part time service jobs the overall effect is net new jobs but a decline in aggregate demand and GDP
*Unemployment is a lagging indicator, it does not tell you where the economy is going it tells you where the economy has been
*World and US trade are collapsing in the absolute sense – total import / export levels are dropping at the same time
*Expecting .50% (50 basis points) increase in rates through summer of 2016
*Fed models are obsolete
*Negative interest rates would destroy the trillion dollar money market industry
*China is back to Yuan devaluation
*Historically when the US economy goes into a recession, it takes 3% cut in interest rates to get the economy out of the recession. The question is then how does the Fed do this when the interest rate is zero or near zero
*The Fed has never accurately forecasted a bubble, or a recession
*This expansion has been going on since 2009, and has been the weakest expansion on record
*The saying goes that expansions cannot die of old age, but they can be murdered by the Fed
*One of the main reasons the Fed is hiking now is to try and preserve what little is left of its credibility
*The other reason the Fed is hiking is to try and “let the air out” of asset bubbles, however these bubbles do not go away slowly but rather abruptly
*The Fed is in a desperate race to get to 3% before the next recession so they can cut
*45% of growth in China’s GDP is from investment and half of that is pure waste
*Real growth in China is probably closer to 3%-4%
*Real global growth after subtracting China is closer to sub 1%
*By summer 2016 the markets are going to figure out we are in recession
*If the Fed cuts rates 60 days before the Presidential Election there will be strong political resistance
*We will likely get to Dec 2016 with a total mess and 2017 will have to go back to easing
*Fed tightening monetary policy and increasing rates through June 2016 will create a stronger dollar
*Given what’s happened to every other commodity gold has held up surprisingly well
*Gold has bounced off of the $1050 level 8 times in the last few years
*USD Gold price is a comparison of two kinds of money
*Gold and Dollars are both money, neither produce yield unless invested
*At some point the market will realize that this strong dollar policy has been a mistake and demand the Fed weaken the dollar
*Likely to have a stronger dollar for the next 6 months, and the earliest Fed cut would likely be a 2017 event barring some catastrophe
*The coming non US dollar denominated debt collapse is up to $9 Trillion in range before factoring in derivatives

Kitco Interview - Looking Towards 2016"Giving his market outlook for 2016, Jim Rickards told Kitco News he expects gold prices to recover during the second half of the year. 'For the next 6 months, I think it’ll be a bit of a tough road for gold,’ he said. According to Rickards, Fed tightening will put pressure on gold prices, but eventually the central bank will need to turn the corner. 'They had to do it before the end of the year or they would have lost all credibility,’ he said. 'When even the Fed realizes how weak the economy is, they’ll have to ease. I expect Fed ease by end of 2016."Russia Today TV Interview"Jim Rickards, editor of Strategic Intelligence and author of “The Death of Money,” offers his analysis of the IMF’s decision to classify Russia’s $3 billion loan to Ukraine as ‘intergovernmental,’ and why the Federal Reserve should have raised interest rates years ago instead of this week."Fox Business TV Interview - Part I"Dec. 16, 2015 - 8:22 - ‘The Death of Money’ author James Rickards, Capital Wave Forecast Editor Shah Gilani, Belpointe Asset Management Chief Strategist David Nelson and FBN’s Liz Claman on the Federal Reserve decision to raise interest rates."Fox Business TV Interview - Part II

Saturday, December 26, 2015

We have noted here on the blog many times that while there are never ending global conferences, meetings, and summits, actual implementation of any kind of significant global coordination proves to be quite difficult. At best it's a very slow process as this article in the BRICSPOST points out. The article laments that now that the 2008 global financial crisis is past, actually getting anything done is hard to do at the global level. This is what we have pointed here. Absent a crisis, change takes place very slowly if at all in the global monetary system. Below are quotes from this BRICSPOST article.

"President Xi Jinping announced in Turkey a few weeks ago that China, as the rotating chair, will host the G20 summit in Hangzhou in September 2016, with the theme of “promoting the innovative, dynamic, concerted and inclusive world economy”. It dovetails with G20’s lasting efforts in promoting global innovative economic growth, perfecting economic and financial governance, stimulating international trade and investment in order to have inclusive and concerted development.

As China assumes its chairmanship, the G20 arrives at a historic juncture of turning itself from a “fire brigade” into the global mechanism for addressing long-term and structural deficiencies in world economy. Greater expectations naturally have surfaced for China’s role in shepherding G20 and world economy in the right direction. What are the most important expectations and what should be done for China to meet them?

Why has China chosen that theme? Broadly speaking, there are three background reasons for the choice:

1. Though the world economy is more or less out of the financial crisis, the economic recovery is slow and unsatisfactory with no visible new driving forces.

2. Reforms in global governance lack progress and international rules-making on economy and trade is messy and confusing to say the least.

3. The G20 feels powerless or has its hands tied in coordinating global macro-economic policies."

. . . . .

What are the expectations for China to have a successful summit and chairmanship for 2016?

"First, China is expected to lead G20 members in better and solid coordination of macro-economic and financial policies. The global community of economies with ever increasing interdependence has become a reality and no economy could even hope to go it alone. “We are in the same boat and need to row in the same direction”. This spirit was in full display in the first few years when all major economies were struggling to survive the financial crisis.

Unfortunately that spirit is no more these days now that the crisis is basically over. The G20 has to transform itself from a “fire brigade” for crisis management to a mechanism for policy coordination in finance, fiscal management and monetary measures. The regular consultations among G20 ministers of finance and governors of central banks should have “teeth” and be endowed with enforcement powers."

. . . . .

"In a nutshell, China’s new developmental strategy of “innovative, coordinated, green, open and sharing” economic growth is similar to the theme for the G20 Hangzhou Summit, demonstrating that a new world economic growth strategy is gradually taking shape. Efforts will be focused on four elements: innovation, improvement upon global governance, promotion of international trade and investment as well as inclusive and concerted development.

Great expectations will produce great achievements if G20 members will continue to work hand in hand as they did at the very beginning of rolling back the financial crisis in 2008-2009."

Politically Correct Santa
by Harvey Ehrlich
'Twas the night before Christmas and Santa's a wreck...
How to live in a world that's politically correct?
His workers no longer would answer to "Elves",
"Vertically Challenged" they were calling themselves.
And labor conditions at the north pole
Were alleged by the union to stifle the soul.
Four reindeer had vanished, without much propriety,
Released to the wilds by the Humane Society.
And equal employment had made it quite clear
That Santa had better not use just reindeer.
So Dancer and Donner, Comet and Cupid,
Were replaced with 4 pigs, and you know that looked stupid!
The runners had been removed from his sleigh;
The ruts were termed dangerous by the E.P.A.
And people had started to call for the cops
When they heard sled noises on their roof-tops.
Second-hand smoke from his pipe had his workers quite frightened.
His fur trimmed red suit was called "Unenlightened."
And to show you the strangeness of life's ebbs and flows,
Rudolf was suing over unauthorized use of his nose
And had gone on Geraldo, in front of the nation,
Demanding millions in over-due compensation.
So, half of the reindeer were gone; and his wife,
Who suddenly said she'd enough of this life,
Joined a self-help group, packed, and left in a whiz,
Demanding from now on her title was Ms.
And as for the gifts, why, he'd ne'er had a notion
That making a choice could cause so much commotion.
Nothing of leather, nothing of fur,
Which meant nothing for him. And nothing for her.
Nothing that might be construed to pollute.
Nothing to aim. Nothing to shoot.
Nothing that clamored or made lots of noise.
Nothing for just girls. Or just for the boys.
Nothing that claimed to be gender specific.
Nothing that's warlike or non-pacific.
No candy or sweets...they were bad for the tooth.
Nothing that seemed to embellish a truth.
And fairy tales, while not yet forbidden,
Were like Ken and Barbie, better off hidden.
For they raised the hackles of those psychological
Who claimed the only good gift was one ecological.
No baseball, no football...someone could get hurt;
Besides, playing sports exposed kids to dirt.
Dolls were said to be sexist, and should be passe;
And Nintendo would rot your entire brain away.
So Santa just stood there, disheveled, perplexed;
He just could not figure out what to do next.
He tried to be merry, tried to be gay,
But you've got to be careful with that word today.
His sack was quite empty, limp to the ground;
Nothing fully acceptable was to be found.
Something special was needed, a gift that he might
Give to all without angering the left or the right.
A gift that would satisfy, with no indecision,
Each group of people, every religion;
Every ethnicity, every hue,
Everyone, everywhere...even you.
So here is that gift, it's price beyond worth...
"May you and your loved ones enjoy peace on earth."

Wednesday, December 23, 2015

As we come to the end of 2015 we can now look back and see if much happened that could lead to monetary system change that would impact our daily lives. This is the main topic we follow here on this blog. The year has been interesting because there were some meaningful steps that could lay the groundwork for bigger changes later on. But these steps were mostly ignored by the general public and were not the focus of mainstream media attention.

Earlier this year we wrote this blog article which listed some of the key roadblocks to the SDR used at the IMF becoming a true global currency. At the time none of the roadblocks listed had been removed. But now some key steps have fallen into place. One very quietly with virtually no media attention at all. Let's take a look using our earlier article as a guide.

"What has to be done to effectively use the SDR as a supra-national reserve currency? Which problems remain to be solved?"

1. The composition of the basket of the SDR A most important step for the SDR to become a global currency is to determine what the proper composition of the SDR basket of currencies shoud be. This is always a subject of great debate and change takes place very slowly. This fall we find out if the Chinese Yuan (and perhaps other currencies) get added in. Until this is resolved on a more permanent basis, it remains a roadblock to use of the SDR as a global currency.2. Reform of the IMF "After years of neglect, the IMF has recently received international support for a revived activity. In line with this idea various suggestions have been put forward in order to strengthen its activities. Also to support the market of the SDRs, a reform of the IMF is needed. This reform would involve the activities to be carried out by the IMF, the funds at its disposal (currently inadequate), governance both in terms of governing bodies and majorities required for its activities to be carried out and of quotas and representation." 3. Change and increase in SDR allocations There aren't near enough SDR's available for it to be used as a global currency now.-----------------------------------------------------------------------------------------------------At year end 2015, we can now check these three items off the list. The decision to add the Yuan into the SDR currency basket has been made. Not only that, the allocation ratio for the new basket has been decided. The Yuan will move into 3rd place. The Euro takes a big hit downward while the US dollar stays at about the same ratio. Yes, all this is mostly symbolic for now. Symbols do matter however. Please notice that China moves up the prestige ladder and the US signals that the US dollar remains at the top for now.Steps #2 and #3 are also important. While most of comments you see about this focus on the increase in voting power for China, the increased in the number of SDR's is very significant in our view here. For the SDR to ever function in the role Jim Rickards has been forecasting, there have to be a lot more of them. This step alone does not create the trillions of SDR's Jim Rickards forecasts will eventually be created, but it does move things in that direction. Again, symbols are important.So, let's review what is left on the list from our earlier article:-----------------------------------------------------------------------------------------------------4. Issue of SDR denominated securities (Bonds) *** This is a big one"The issue of SDR denominated securities would be a good starting point to increase the appeal of the SDRs. One can make the hypothesis that initially the IMF itself, some Governments and special international financial institutions such as the World Bank could issue SDR denominated securities, which could then be followed by banks and non-financial firms."5. The set-up of a clearing system "The experience with the ecu has clearly shown that the setting up of a clearing system is a crucial point. The establishment of a clearing system for the ecu facilitated its use and the growth of the market, proving to be the best way to build up liquidity. The Bank for International Settlements was called to act as clearing house. Similarly, but considering the different nature of the market of SDRs (public rather than private), it can be said that the setting up of a clearing system for central banks investing in SDRs would constitute a step of great importance."--------------------------------------------------------------------------------------------There you have it. These are the steps to watch for in the future that would indicate we are moving further towards major monetary system change that could impact our daily lives.Basically if we see changes that thrust the SDR used at the IMF into a more prominent role in the monetary system, it will be significant confirmation for Jim Rickards forecast on this. If we get a new major financial crisis that leads to this, it will be total confirmation of his forecast. We have just seen confirmation of three important first steps on the path to change in 2015, despite very little media attention to them.

Tuesday, December 22, 2015

We have followed this story for two years now. The 2010 IMF reforms giving more voting power to China at the IMF had been stalled in the US Congress. But very quietly, they were finally passed in the recent US spending bill. The provision was buried deeply with no mention of it prior to the vote being taken. Below are some quotes from this USA Today article on it.

---------------------------------------------------------------------------------------------------------Deeply buried in the $1.1 trillion spending deal unveiled by congressional leaders Wednesday is an arcane provision for new funds and reforms at the International Monetary Fund. Though the item is getting scant notice, it is a big deal for preserving the United States' seven decades of leadership in global finance.The measure contributes $300 million to the IMF and doubles to $670 billion the funds the IMF can lend to countries in distress, such as Greece and Ukraine, to avert global financial meltdowns.

President Obama rightly pushed hard for the deal, calling it vital to U.S. leadership and security.The legislation gives China, India, Brazil and other developing nations a bigger share of voting power in the IMF to reflect the size of their economies while preserving the sole veto power held by the United States, which controls 16% of the votes. China’s share rises from 4% to 6%.----------------------------------------------------------------------------------------------------My added comments: Please note that these reforms not only give China more voting power, they also "double to $670 billion the funds the IMF can lend to countries in distress." If you believe in Jim Rickards prediction that the IMF will eventually play a major role in the next global financial crisis using the SDR, this is a meaningful step in that direction.

Monday, December 21, 2015

Recently researcher Koos Jansen interviewed Willem Middelkoop who is the author of The Big Reset. We have talked quite a bit about a reset here over the past two years. In this interview Mr. Middelkoop explains how the reset is taking place, but at a much slower pace than many had anticipated. This is in line with what we have noted here on the blog. Below is a sample Q&A from this interview.

Middelkoop: Any country, like the US, that issues the dominant world reserve currency has almost limitless power to finance other countries. It gives the monetary hegemony ‘exorbitant privilege,’ as the French remarked in the 1960s. Because it can print the world currency the US can buy anything it wishes without having to worry about its liabilities. While the Soviet Union collapsed because they had to import food with hard-earned dollars from their oil exports, in the 70s and 80s, the US could start the Korean War and the Vietnam War with freshly printed greenbacks. By ‘obliging’ foreign central banks to keep their monetary reserves in Treasury bonds, the US in fact forced them to finance US military spending abroad, as Michael Hudson explains in his book ‘Super Imperialism’. In this new form of imperialism, the US is able to rule not through its position as world creditor, but as world debtor. America’s weakness as a debtor country has indeed become the foundation of the world’s monetary and financial system. A Chinese market commentator once remarked: ‘World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy … a dollar hegemony that forces the world to export not only goods but also dollar earnings from trade to the US … Everyone accepts dollars because dollars can buy oil.’ Only when dollar-holding nations decide to buy natural resources instead of US treasuries, is the dollar’s reserve currency status in danger. This is exactly the exit strategy China and Russia seems to be playing right now. In recent years, the Russians have sold most of their dollar holdings, while they tripled their gold position. The Chinese have stopped buying extra US Treasuries since 2010 while they have imported and invested in huge amounts of gold. These developments signal the first stages of the US dollar’s decay."

Sunday, December 20, 2015

This is not a new situation but IMF Director Christine Lagarde will have to stand trial on a negligence charge which goes back to a time before she become IMF Director. You can read the full article on this here in The Guardian.

"Christine Lagarde, managing director of the International Monetary Fund, is to stand trial in France over a multimillion-euro government payment to a controversial tycoon who supported former president Nicolas Sarkozy.

Lagarde has been accused of “negligence by a person in a position of public authority” over the award of more than €400m to Bernard Tapie. . . . . . "

Saturday, December 19, 2015

It's that time of year when at least most people tend to extend a little more peace and good will to those around them. Every time I look at our little dog Bean he reminds me of that feeling. He extends peace and good will to everyone he encounters on a daily basis.

I wish you could see the smiling faces of kids when they see him when we take a walk at a local park. Or when he gets to take a special trip to our local Home Depot (local home improvement store -see below). He is a huge hit with everyone in the store (customers and employees) as he stands at the front of the shopping basket looking like a hood ornament :)

Dog lovers already know what I am talking about, but the world would truly be a better place if everyone took the same attitude Bean does. He has endless patience, he is happy to greet everyone he meets, and he makes the day a little brighter for anyone who happens to encounter him. Bean wishes everyone a Happy Holiday Season!

Friday, December 18, 2015

The Bitcoin story has been somewhat strange since it arrived on the scene. We can add this story to the list of bizarre Bitcoin events. According to this Daily Mail article the person who may have been the creator of Bitcoin wanted to swap quite a few of them for some gold and software ($85 Billion). Below are a few quotes from the article.

"The suspected founder of cybercurrency Bitcoin claimed he used nearly $85 million worth of the currency to buy gold and software based on advice from businessman Mark Ferrier.

Sydney academic and supposed Bitcoin creator Craig Steven Wright, who is said to use a Japanese pseudonym, allegedly struck a deal with former mining contractor Mark Ferrier in 2013 and planned to use the gold to build his business, The Australian reported. But the alleged deal fell through, prompting Dr Wright to sue Mr Ferrier for $84.25 million in the Federal court, but the claim was dropped in 2014.

The pair met at a mining conference and allegedly agreed Mr Ferrier would buy software on Mr Wright's behalf. Dr Wright claimed Mr Ferrier, who was working with an ASX-listed goldmining company, also persuaded him to purchase gold - allegedly telling him gold was a good asset to have in case the price of 'funny money' Bitcoin crashed."

Thursday, December 17, 2015

Claudio Borio of the BIS (Bank for International Settlements) gave a recap of where he sees the markets as we come to the end of 2015. He says the markets have been fairly calm, but it's "an uneasy calm". Below are some selected quotes from his recent speech.

On-the-record remarks by Mr Claudio Borio, Head of the Monetary & Economic Department, and Mr Hyun Song Shin, Economic Adviser & Head of Research, 4 December 2015.

Claudio Borio

"Calm has reigned over financial markets, but it has been an uneasy calm.

We left the markets in turbulence in the previous quarter. Then, just as suddenly as it had arrived, the turmoil gave way to calm. Markets roiled in August and September only to rebound in October. Stock markets recorded their strongest one-month rally in recent years. Commodity prices initially bounced back. Emerging market currencies stabilised alongside portfolio flows. Credit spreads narrowed. Volatilities declined. On the face of it, the turbulence turned out to be more like a brief summer storm than autumn thunder heralding the arrival of a long winter.

As events unfolded, the picture did not change much. By and large, financial markets took a brief pause. And they waited. They waited with bated breath for what they regarded as a highly likely lift-off by the Federal Reserve in December."

. . . . .

"Zoom in on the fixed income asset class and a number of anomalies suggest that not all is well in markets. Surprisingly, despite the higher credit risk involved, US swap rates have actually been lower than the corresponding Treasury rates. And even on a currency-hedged basis there has been a persistent premium for those wishing to borrow dollars - so much for economic textbooks' faith in covered interest parity. Thus, market-specific supply and demand imbalances are not being arbitraged away as would normally be the case. Financial institutions, notably banks, are not using their balance sheet capacity as they once did."

". . . . . in the background, interest rates continued to remain exceptionally low. Even as the Federal Reserve appeared to be approaching lift-off, US 10-year Treasury yields were hovering around 2.2% in late November - a telltale sign of an unusually shallow expected path for the policy rate. Moreover, following clear signals of ECB accommodation, some 2 trillion, or fully one third, of euro area sovereign paper was trading at negative yields - a new peak. Market participants also kept wondering whether the Bank of Japan might ease further. Monetary policy divergence loomed ahead, with potentially significant implications for exchange rates and market adjustments. At the same time, interest rates, current and expected, continued to test the boundaries of the unthinkable day after day - and this despite the matter-of-fact tone of much of the running commentary. Familiarity breeds complacency.

Under such extraordinary conditions, it is not surprising that markets remain unusually sensitive to central banks' every word and deed. Just think of the market gyrations following yesterday's ECB decision to ease even further, but to an extent that fell short of market expectations. Hyun will say more about this shortly.

Against this backdrop, it is hard to imagine how the calm could be anything but uneasy. There is a clear tension between the markets' behaviour and underlying economic conditions. At some point, it will have to be resolved. Markets can remain calm for much longer than we think. Until they no longer can."

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